On Monday, Treasury Secretary Janet Yellen predicted that the United States will run out of money to pay its debts as early as June 1, if President Joe Biden and Congress do not come to an agreement and raise the debt limit.
She wrote in a letter to House Speaker Kevin McCarthy that based on current data, the debt ceiling will be hit by early June at the latest.
“We will be unable to continue to satisfy all of the government’s obligations by early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time,” Yellen said, and warned that “waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States.”
Yellen cited past “impasses,” a reference to the current standoff between McCarthy and Democrat leaders President Joe Biden and Sen. Chuck Schumer (NY), as evidence that congressional action was needed to stave off an economic crisis.
McCarthy defied the expectations of some by successfully unifying House Republicans around a plan to address the debt ceiling last week. The chamber narrowly passed the Limit, Save, Grow Act along partisan lines after tense negotiations within the GOP conference.
The bill would raise the debt limit in exchange for substantial spending cuts that would save the government an estimated $4.8 trillion over ten years.
Schumer, however, has declared the bill, which he calls the “Default on America Act,” dead on arrive in the Senate, despite offering no viable alternatives to solve the looming catastrophe.
Biden had up until Monday refused to negotiate with McCarthy on the debt ceiling. But, in a move that coincided with Yellen’s letter, the president gave in and reached out to McCarthy, Schumer, Senate Minority Leader Mitch McConnell (R-KY), and House Minority Leader Hakeem Jeffries (D-NY) to meet this month on the matter, the White House confirmed.
Yellen told McCarthy, “If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests.”
McCarthy replied to her letter in a statement on Monday evening, blasting the Biden administration for going three months without any action.
“After three months of the Biden administration’s inaction, the House acted, and there is a bill sitting in the Senate as we speak that would put the risk of default to rest,” McCarthy stated. “The Senate and the President need to get to work — and soon.”